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A Causal Effect: Business Innovation and Political Activism

Earlier this year, researchers from the Queensland University of Technology and HEC, a graduate school for business in Paris, published their article “Political activism and firm innovation.” In their article, Alexei Ovtchinnikov, Syed Reza and Yanhui Wu delved into a myriad of research and data, but their findings, stated simply, were that political activism positively affects firm innovation. The paper’s overarching findings state that increased involvement in political activity reduces political uncertainty, which fosters innovation, and politically active firms successfully time future legislation to set their innovation goals, which typically yields more innovative success. We find that WIPP members who understand policy and its impact on their business growth, and who participate in calls for action, are those that are among the most successful.

The paper examines two distinct hypotheses to explain the relationship:

Political activism increases the role of political intelligence with respects to supplying market-moving information. Because innovation is costly and highly uncertain, firms with no access to political information innovate less to reduce their systematic risk. If a firm has a more confident assessment of the future of the market they are entering into, they will have increased confidence in their newfound innovation.

Political activism increases opportunity and accessibility to government procurement. The study theorizes that politically active firms will also innovate more if the firm has a deeper understanding of the benefits of federal contracting. This will open up more opportunities for firms that can yield more success with projects that requires access to government permits, licenses and other approvals.

In the study’s findings, researchers found overwhelming data to support that firm innovation is strongly positively related to political activism and that these findings are consistent with these two hypotheses.

These findings hold importance for three reasons.

It gives a more holistic understanding of how political activism can positively affect firms with a newfound respect to both fiscal and innovation investment.

It explains that political activism is an important determinant of innovation.

It demonstrates how political intelligence may be utilized for not only external investment but internal investment decisions.

When looking at your company’s innovation process, do these findings run parallel? Do you think your company would benefit from increased advocacy efforts during your innovative process? Comment below.